FactSheetFinal

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Apr 3, 2024

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1 FACT SHEET

2 Company Overview: Spotify Technology S.A. is a leading Swedish audio streaming and media service provider, founded by Daniel Ek and Martin Lorentzon on April 23, 2006. As of December 2023, it boasts over 602 million monthly active users, including 232 million paying subscribers. The platform is renowned for its vast catalog, offering more than 100 million songs and five million podcasts from various record labels and media companies. Spotify's reach extends to most of Europe, Africa, the Americas, Asia, and Oceania, covering a total of 184 markets. The service is accessible on a wide range of devices, including computers running Windows, macOS, and Linux, as well as iOS and Android smartphones and tablets, smart home devices, and digital media players. Stock Performance: Product Offerings: 1. Music: Spotify leads in global music streaming, hosting over 82 million tracks and connecting more than 433 million users with 11 million artists. The platform's growth is attributed to its principles of ubiquity, personalization, and a freemium model, allowing both free and paid user experiences. Spotify has innovated by monetizing both users through subscriptions and ads, and artists through marketplace products, offering valuable data analytics and audience insights. 2. Podcasts: Expanding beyond music, Spotify entered the podcast industry in 2019, despite skepticism. Investing heavily, Spotify became a leading podcast platform, integrating podcasts into its music app for convenience and broader distribution. This integration has

3 enhanced user experience and expanded market opportunities, with podcast listeners on Spotify significantly increasing. 3. Audiobooks: Looking forward, Spotify is venturing into audiobooks, applying its successful strategy from music and podcasts. By acquiring Findaway, a leading audiobook distributor, Spotify aims to introduce audiobooks to its vast user base, enhancing personalization and expanding its audio offerings. This move aligns with Spotify's mission to diversify and enrich its audio streaming service, leveraging its established platform to introduce new content verticals. Revenue Breakdown: 1. Premium: Spotify’s premium service is sold B2C to end-users through a variety of subscription plans: Standard Plan, Student Plan, Family Plan, and Duo Plan. Each of these respective plans provide full functionality of the Spotify app – importantly when and how they listen to their content. Spotify premium accounts for almost 85% of Spotify’s FY revenue which represents a consistent and predictable stream of income. As of December 31, 2023, they have 226 million premium users and have historically maintained a ratio of paid subscribers to total users at 40. Revenue from the premium segment has compounded at 30% CAGR over the past 6 years. While the standard premium plan has not increased from its $9.99 price point over the last 10 years in the US, Spotify has implemented over 25 different price hikes in various markets since 2020 and witnessed minimal increase in churn rates – highlighting the trade-off between revenue and churn to be quite favorable for Spotify. 2. Ad-supported: Spotify’s freemium ad-supported service enables users to access all content with reduced user controllers. For example, users are unable to skip more than 6 songs every hour, download music, or share content with their feed. Currently, they have 361 million ad-supported users as of December 31, 2023, representing a CAGR of 28%. The ad-supported option is the number 1 pipeline of premium subscribers albeit making up only 12% of Spotify’s revenue.

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4 Industry: Audio Streaming Industry Existing Competitors: Spotify’s top 3 competitors are Apple Music, Amazon Music, and YouTube Music. As of February 1, 2024, Spotify holds most of the market share by a significant margin at 30.5%. Apple Music is next at 13.7%, with Amazon Music close behind at 13.3%. Although Spotify currently leads the market, existing competitors are still a huge factor due to the uniformity of offerings in the audio streaming industry. Since each provider is streaming mostly the same music, price and user experience are critical, and these are things that can quickly shift and develop. Furthermore, Apple and especially Amazon are massive companies that certainly do not lack funding, so their ability to catch up to Spotify must not be overlooked. Existing Competitors are the most relevant of Porter’s 5 forces for Spotify and the Audio Streaming industry. Threat of New Entrants: The Threat of New Entrants is one of the least significant of Porter’s 5 forces for Spotify. This is primarily due to the abundance of existing firms, and the barrier to entry. To be able to distribute popular music/podcasts on their platform, an audio streaming service must negotiate a licensing agreement with the label/artist. This creates a high barrier to entry, as popular creators are not likely to enter agreements with services that cannot expose their music to a wide audience. Furthermore, many very well-established firms already exist at varying price points starting from free with ads, so it would also be extremely difficult for a new firm to compete for this reason. Therefore, the Threat of New Entrants is not a relevant threat for Spotify. Bargaining Power of Suppliers: The Bargaining Power of Suppliers is not very relevant to the audio-streaming industry due to the mutualistic nature of the firm-supplier relationship. Label and independent artists rely on streaming services like Spotify to deliver their content to consumers, so they do not have much bargaining power. Likewise, Spotify is reliant on artists and labels to provide them with content to deliver to their customers, however, Spotify is more important to individual artists/labels than they are to Spotify. The music industry is extremely reliant on popularity, so it will practically always be in the best interests of artists and labels to distribute their music as widely as possible. Overall, the Bargaining Power of Suppliers is not a significant consideration for Spotify.

5 Bargaining Power of Buyers: Buyers have a significant amount of bargaining power, making this a particularly relevant force to Spotify. Different audio streaming services are largely undifferentiated, as their main offering is music created by artists whose music streams on every platform. This makes the price point and user experience two of the most significant distinctions at the top. Spotify has looked to differentiate itself by signing exclusivity deals with huge podcasters like Joe Rogan and providing unique user experiences like “Spotify Wrapped” however, given the uniform nature of their main offering, the Bargaining Power of Buyers is still a very significant force for them to consider. Threat of Substitute Products The Threat of Substitute Products is practically nonexistent at this time. The most significant alternative to streaming a song is watching the video of the song on a platform like YouTube instead, but this requires that the consumer keeps their phone unlocked, watches intermittent advertisements, and has an internet connection (barring a subscription). Given these constraints, watching a video as a substitute for listening to a song on an audio streaming service isn’t a realistic option for the avid music consumer, which is the bulk of Spotify’s target market. Physical substitutes including records and CDs are almost entirely obsolete and pose no real threat to Spotify. Given these considerations, the Threat of Substitute Products is not significant for Spotify and the Audio Streaming industry. PESTEL Analysis: Political Factors: Political instability, government regulations and trade tensions could affect Spotify's expansion plans and operations. Changes to immigration policies or trade agreements could affect their ability to attract talent or negotiate licensing deals. Trade agreements and tariffs may impact its cost of doing business, while geopolitical tensions or content censorship regulations could prevent Spotify from entering certain markets. China’s regulatory hurdles, for example, have prevented Spotify from entering the potentially lucrative market. Economic Factors: Global GDP growth, inflation rates and disposable income levels all play a part in shaping Spotify's revenue and subscriber growth. An economic downturn, such as the 2008 financial crisis may decrease spending on non-essential services like music streaming, resulting in reduced subscriber growth. On the other hand, economic prosperity can increase willingness to spend money on entertainment services. Economic conditions also impact Spotify's pricing strategy. Spotify provides discounted subscription plans for students due to financial restraints associated with this demographic. Furthermore, lawsuits could potentially incur penalties and increased

6 operational expenses for Spotify, while legal challenges could affect both market share and stock value. Social Factors: Evolving consumer preferences and demographics impact Spotify's user base and content consumption. Trends related to diversity and inclusion can shape Spotify's content curation strategies. Social attitudes concerning preference for digital streaming over physical formats plays an essential part in Spotify's long-term growth and expansion. User experience is important to platforms like Spotify which has driven the company to continuously enhance usability and features such as personalized playlists. Social attitudes regarding artist compensation and fairness in the music industry can also have a powerful influence on legal disputes involving musicians and legal battles could change user perception of Spotify regarding its ethical stance. Technological Factors: Spotify's success depends heavily on technological innovations for music streaming services. High-speed internet and mobile phones were instrumental to Spotify’s widespread acceptance as a music streaming solution. Factors including artificial intelligence and machine learning recommendations can also contribute to competitive advantages for the company. Smartphone and tablet proliferation has enabled Spotify to reach an expanded user base, as its platform can now be conveniently accessed while taking advantage of artificial intelligence and machine learning algorithms to analyze user preferences, improving both experience and retention rates. However, there is a negative effect from technological developments that facilitate content sharing and digital piracy which may result in legal disputes regarding copyright violations. Environmental Factors: While environmental sustainability might not directly influence Spotify's operations, the awareness can influence consumer behavior and corporate reputation. Spotify may come under increasing pressure to adopt eco-friendly practices, such as reducing energy consumption at data centers or supporting carbon neutral initiatives, thus Spotify has made efforts to address its environmental footprint by using renewable energy sources for powering its data centers. Legal Factors: Regulations and intellectual property laws affect Spotify's license agreements and copyright compliance strategies. Spotify has often been accused of copyright infringement by artists and record labels for streaming unlicensed music. Regulations relating to royalty rates and distribution rights could significantly influence Spotify's costs and profits and there have been lawsuits against Spotify alleging failure to pay mechanical royalties to songwriters and publishers. Further, as Spotify expands its podcast business, legal issues, such as defamation claims over individual episodes, have arisen. Spotify must comply with European data privacy regulations like GDPR to safeguard user data and maintain transparency around data processing practices. Legal actions could arise related to antitrust or unfair competition given Spotify's dominant market position. Apple has accused Spotify of engaging in anti-competitive conduct in

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7 the past, while Spotify has filed complaints with regulatory authorities alleging Apple Music enjoys unfair advantages due to App Store policies. Thus, we can see how different PESTEL factors could affect Spotify's operations and strategy. Understanding and adapting to external influences are important to sustain Spotify's continued success in the highly dynamic music streaming industry. Competitors: Apple Music: 15% Market Share Apple's subscription-based music streaming service integrates seamlessly with their ecosystem of iPhones, iPads and Apple Watches to deliver playlists and radio stations curated specifically to Apple products users already invested in them. One key advantage over rival Spotify lies in Apple's deep integration into their larger ecosystem offering customers invested in Apple products a cohesive experience. Amazon Music: 10% Market Share As part of Amazon's entertainment offerings through Prime, Amazon Music enjoys an expansive customer base and membership program. Offering both ad-supported and ad-free tiers, including voice control over Alexa-enabled devices, Amazon provides seamless music playback experience from devices connected with Prime membership. YouTube Music: 8% Market Share Google announced YouTube Music, an innovative music streaming service powered by its vast library of musical content available on YouTube, as a music streaming option that taps its vast catalog. YouTube Music includes official songs and albums, user-generated music videos and personalized recommendations tailored specifically for user preferences and listening history. One distinct aspect of this offering includes its huge library of music videos which appeals to those looking for visual accompaniment of audio tracks. Internal Analysis: VRIO Criteria: Spotify has three core competencies that provide a sustainable competitive advantage. Organizational resources like brand, market share, and partnerships are the foundation of Spotify's leadership in the global music streaming industry. For example, Spotify's strong brand attracts users to the platform. Its large market share creates network effects, increasing the value proposition as the user base grows. Partnerships with device manufacturers make Spotify the default music app. Together, these competencies satisfy VRIO criteria.

8 Brand Popularity: Spotify’s brand awareness and sentiment among competitors is very valuable, rare and difficult to replicate for any competitor. The repetition of brand quality from Spotify in terms of user engagement is innovative and establishes a deeper relationship with users by all segments. Through features like Spotify Wrapped and AI-generated playlists, customers can be more attracted to Spotify over its competitors. Marketing and user experience is also well leveraged with branding that delivers the demand to the users. . Major Market Share: Spotify’s market share position enables it to reap network effects with their lead in the music streaming market. Spotify’s ability to secure large numbers of users and to sustain its market- leading position is something that no competitor in the highly competitive music streaming market is likely to achieve. This, in turn, allows Spotify to enhance user value by providing better access to content among other benefits. Incumbents often have an advantage in reaping network effects and in taking advantage of economies of scale that derive from network effects such as those related to user engagement. Keeping its user base large and sustained is a core design element of Spotify’s operations and strategic initiatives. Partnerships with Major Device Manufacturers: Partnering with device manufacturers like Samsung enhancing its accessibility and user reach. Establishing partnerships with major device manufacturers is not common among all music streaming services. Competitors may find it challenging to secure similar partnerships or replicate the level of integration Spotify has achieved with major device manufacturers. Spotify strategically manages and maintains these partnerships to ensure continued access to a wider user base through various devices.

9 Company Culture: It can be said that one of Spotify’s strongest core strengths is their company culture. Rated by internal and external sources to be one of the best in the country, fostering growth and collaboration while maintaining a level of fun and excitement. This unique culture where teams are semi-independent “start-ups” with high levels of motivation and innovation creates values as specified within the VRIO framework. Within a competitive market like the music streaming industry with competitors such as Apple Music and YouTube music, an open, highly adaptable company culture is necessary for further growth. To be more specific, their company culture can be summed up in 4 parts. The first major part is their team-oriented nature. This is a significant departure from waterfall-based organizations found in more traditional business entities. Their agile approach to development and collaboration allows for faster turnaround times in a highly competitive industry. The second major part is the openness and acceptance of all ideas within a team or group. Managers are welcoming to all constructive feedback and highly encourage participation from all team members. Within Spotify there are no bad ideas. The third part of their work culture is their focus on fun and being quirky (in a good way). As seen in their product and campaigns, Spotify values having a good time at work and within the user experience. This focus on something that more serious companies would often disregard, is a major factor in the wellbeing of their workers and fostering an open and accepting workplace with highly motivated team players. The final part is their ability to mobilize and lead at a fast pace. In a competitive environment, they can identify and contextualize current trends and align human and capital resources to capitalize on them. Spotify is the perfect example of an agile company. Executive Team: Internal:  Daniel Ek (CEO) o Term as CEO: 2006-Present o Daniel Ek has served as Spotify’s CEO since the company’s inception in 2006.  Martin Lorentzon (Chairman: 2006-2015) o Co-founder alongside Daniel Ek, Martin Lorentzon played a crucial role in the early financial backing and strategic direction of Spotify. His influence has been critical in shaping the company's culture and growth trajectory. Even after stepping down from an active operational role, Lorentzon's contributions and his vision continue to impact Spotify's ethos.

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10  Gustav Söderström (Co-President, Chief Product Officer, and Chief Technology Officer: Present) o Gustav Söderström, as Chief Product Officer and Chief Technology Officer, has led innovation in Spotify's product offerings.  Babar Zafar (Vice President of Product Development: Present) o Babar Zafar, as Vice President of Product Development, has been crucial in developing Spotify's product strategy.  Dawn Ostroff (Chief Content Officer: 2018-2023) o Dawn Ostroff, joining as Chief Content Officer, has been pivotal in expanding Spotify's podcast and content strategy, significantly influencing the platform's growth in non-music content. Popular Press: Inorganic Growth - Notable Acquisitions Year Company Acquisition Price ($millions) Reasons for Acquisition 2022 Sonantic 98 Sonantic specializes in creating lifelike, artificial intelligence- generated voices. Spotify's acquisition of Sonantic is aimed at enhancing the platform's audio content, potentially offering new, innovative content creation tools for podcasters and artists, and improving user experience with more engaging and diverse audio formats. Podsights 83 Podsights is a podcast advertising measurement service that helps advertisers better understand the effectiveness of their ad spend. By acquiring Podsights, Spotify aimed to bolster its advertising platform, offering more precise analytics and measurement tools to advertisers, thus making podcast advertising on Spotify more attractive and efficient. Acquired alongside Podsights in 2022, Chartable is a podcast analytics platform. The acquisition is part of Spotify's effort to provide podcast creators and advertisers with detailed insights and analytics about podcast performance. Chartable's tools help creators and advertisers track listenership trends, marketing campaign effectiveness, and audience growth, further enhancing Spotify's attractiveness as a platform for both content creators and advertisers. Chartable 2021 Findaway 123 Acquiring Findaway, a leader in digital audiobook distribution, marked Spotify's entry into the audiobook market, aiming to become a comprehensive audio platform that includes music, podcasts, and now audiobooks.

11 2020 Megaphone 235 Megaphone's podcast advertising and publishing platform was acquired to enhance Spotify's advertising capabilities, offering better targeting and analytics for advertisers and improving monetization options for podcast creators. The Ringer 196 The Ringer’s sports and pop culture content helped Spotify broaden its podcast library, appealing to a wider audience with interests in sports, entertainment, and pop culture discussions. 2019 Gimlet Media 230 To bolster Spotify's podcast content with Gimlet's reputation for producing high-quality narrative-driven podcasts. Anchor 110 Anchor's tools for podcast creation, distribution, and monetization were integrated into Spotify to support its strategy of attracting more podcast creators by simplifying the podcast production process. Parcast 56 Known for its serialized storytelling and thematic podcast series, Parcast helped Spotify diversify its podcast offerings, particularly in genres like true crime and mystery. Relevant News:  Controversy and Content Moderation: o Spotify has faced challenges, particularly regarding content moderation. The platform's decision to host Joe Rogan's podcast, which has been a point of contention due to discussions around COVID-19 and vaccination, highlights the complex balance Spotify must maintain between supporting free speech and addressing misinformation. Spotify's response, including pledging to add advisories to content addressing COVID-19, reflects the broader industry challenge of content moderation and the importance of developing effective strategies to manage misinformation.  Major layoffs: o Between 2022 and 2024, the tech industry witnessed a significant number of layoffs, with many leading companies reducing their workforce. Spotify, among other tech giants, also announced layoffs during this period. In December 2023, Spotify announced it would lay off 1,500 workers, approximately 17% of its staff, as part of an organizational adjustment to enhance efficiency and adapt to the rapidly changing tech landscape . This move reflects a broader trend in the tech industry, where companies have been reevaluating their workforce needs in response to economic challenges and shifting market demands. By February 2024, the tech sector had seen 154 companies lay off 39,496 workers, indicating a continued pattern of job cuts across the industry . Spotify's layoff of 6% of its global workforce in January 2024 was part of this wave, underscoring the company's efforts to streamline operations amid a challenging economic environment.  Chief Content Officer and Advertising Business Officer laid off (2023):

12 o Dawn Ostroff exited her roles as the Chief Content Officer and Advertising Business Officer at Spotify. This move is part of a significant reorganization within Spotify aimed at streamlining operations and cutting expenses. Ostroff chose to leave on her own accord and will remain with Spotify in a consultancy capacity to support the transition process. Alex Norström, the Chief Business Officer, assumed Ostroff's previous duties, overseeing content, advertising, and licensing. This change is in line with Spotify's strategy to consolidate its engineering and product development under the leadership of Chief Product Officer Gustav Söderström.  New Features and Opportunities for Creators (2023): o During the "Stream On" event, Spotify unveiled a series of enhancements aimed at empowering creators at all career stages. These include new app functionalities, a one-stop shop for podcasting, and more avenues for artists to engage with their fans. The goal is to establish Spotify as the prime platform for creators to build their careers, thrive, and grow. Some of the notable features include music, podcast, and audiobook previews, new discovery feeds, autoplay for podcasts, a personalized AI DJ, and Smart Shuffle.  Partnership with FC Barcelona (2023): o Spotify has partnered with FC Barcelona, blending music and football in a unique collaboration. This partnership aims to create new experiences that bring together the worlds of music and sports, showcasing the company's efforts to expand its influence and connect with audiences in innovative ways

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13 Bibliography: Davis, Anne Marie. "Spotify VRIO/VRIN Analysis & Value Chain Analysis (Resource- Based View)." *Rancord Society*, 9 Mar. 2019, www.rancord.org/spotify-vrin-vrio-analysis- value-chain-analysis-resource-based-view. Stassen, Murray. "Spotify has spent $1.2bn+ on companies to scale its non-music business over the past 3 years." *Music Business Worldwide*, 11 Aug. 2022, www.musicbusinessworldwide.com/spotify-has-spent-1-2bn-on-companies-to-scale-its-non- music-business-over-the-past-3-years. Spotify Technology S.A. 10-K for the Fiscal Year Ended December 31, 2023. U.S. Securities and Exchange Commission, [filing date]. URL." “Spotify: A Case Study in Business Strategy and Value Compounding.” MOI Global , 14 Mar. 2023, moiglobal.com/spotify-case-study-202008/. Stacy.Goldrick@groupsjr.com. “An Update on December 2023 Organizational Changes.” Spotify , 4 Dec. 2023, newsroom.spotify.com/2023-12-04/an-update-on-december-2023- organizational-changes/.

FactSheetFinal

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